The Swiss National Bank kept borrowing costs unchanged and dropped a reference to possible further hikes after inflation slowed emphatically below its ceiling.
Policymakers led by President Thomas Jordan left their key interest rate at 1.75% for its second consecutive meeting on Thursday, in an outcome anticipated by all economists surveyed by Bloomberg. They also dropped wording about selling foreign currency.
"Uncertainty remains high," the central bank said in a statement. "The SNB will therefore continue to monitor the development of inflation closely, and will adjust its monetary policy if necessary."
With Switzerland facing the weakest growth in four years for 2024, inflation now down to 1.4%, and the franc close to at an eight-year high against the euro, the central bank is in a holding pattern.
SNB officials are in no hurry to embrace the prospect of rate cuts at a time even as investors bet on the Federal Reserve and global peers to do so. By contrast, on the eve of the decision, US officials released forecasts amounting to a pivot toward eventual easing.
European counterparts are under pressure to follow suit on Thursday. Norwegian officials are expected to shirk from a final rate hike, while both the Bank of England and European Central Bank are also anticipated to keep borrowing costs unchanged in their last decisions of 2023.
Speculation that Frankfurt policymakers will move faster then the Swiss to cut rates last week drove the franc to its strongest level against the euro since the SNB abandoned its currency cap almost nine years ago.
"The SNB is also willing to be active in the foreign exchange market as necessary," the central bank said, while removing wording in previous statements saying that "the focus is on selling foreign currency."
Swiss officials surprised investors with an early pause to their tightening in September after Switzerland stuck to the slow inflation that has made it stand out in the current cycle, when other advanced economies saw much faster price growth.
According to their forecasts, the outlook will remain similarly benign. They envisage inflation of 2.1% for this year, 1.9% next and 1.6% in 2025.
While economists including BlackRock Inc.'s Martin Lueck reckon the SNB could pivot to a rate cut as early as March, most of of those surveyed by Bloomberg see a first cut in December 2024.
SNB's tighter policy has started to weigh on growth, as the third quarter saw slim expansion after the second was revised to contraction. The central bank expects the Swiss economy to grow around 1% this year and in a range of 0.5% to 1% in 2024.
Jordan, who will hold a press conference in Zurich, will likely face questions about when a first rate cut might be on the agenda.
Source : Bloomberg
